NVR Incorporated (NVR) constructs and markets single-family
homes, townhouses and condominiums under three trade names: Ryan
Homes, NV Homes, and Fox Ridge Homes. The company currently
serves 16 metropolitan markets in 10 states. In its largest
market, the Maryland Metropolitan area, NVR derived 60% of its
homebuilding revenues. The stock has appreciated very nicely over
the past year, gaining a phenomenal 200%. Much of the stocks
recent price strength can be attributed to NVR's impressive
performance in the third quarter. The homebuilder posted a 58%
quarterly increase in earnings from the same period a year
earlier. Even more interesting, the company only has 8.37 million
shares outstanding with 60 million authorized. Sound like a
possible split play? We certainly think so! The chart on NVR also
looks compelling. NVR shares may have just signaled yet another
momentum breakout. Bullish crossovers in both the MACD and
Stochastic provide us with further confidence of a potential
rally. To that end, we'll look for resistance to come at today's
intraday high of $168.25 and then at the $170 mark. Support comes
in at the $160 mark, bolstered by the 5-dma of $160.83. Traders
looking for an initial position in NVR should look to time their
entries when the stock breaches above resistance or recoils from
support on strong volume of 40,000 shares traded by midday. We
will set our stop at $156.50 to limit our downside risk.

Wednesday's Update:

While the market as a whole circled the drain today, the
homebuilders held up well. This superior show of relative
strength continues to amaze us, especially in the midst of this
weak market. But the more these stocks continue to hold up, the
more frustrated the shorts will become, forcing many to cover
buy. As more of this cover buying occurs, the stronger the
homebuilders become and so on. Adding to the attractiveness of
this play is the fact that consumer confidence is on the upswing.
This can only be positive as homebuilders gear up for the busy
summer home buying season. Turning to the chart, we see that
NVR's MACD has issued a buy signal and its OBV is hovering at
two-year highs. Resistance for NVR comes in at $168.25, its all-
time high and support has recently been confirmed at NVR's 5-dma
of $162.75. New entries could be considered on a break of
$168.25 or a bounce off of $162.75 on volume that puts the stock
on track to do 85,000 for the day. Our stops remain at $156.50
to protect against a reversal.